As government contractors, it can be difficult to map your employee pay periods to the required billing cycles for invoicing your contracts. The most common pay periods tend to be semi-monthly or bi-weekly, which are easy for employees to understand. However, what happens when your client demands that you bill them every week? Or every 10 days? Or every full moon?

Based on your feedback, we created a feature to address off-cycle billing regiments. This new feature, importing partial timesheet periods, allows you to process labor distribution for specific contracts & projects, or full timesheets up to a certain point in time. By following the process below, you will be able to bill for any time period that is different from your pay cycle.

Accrued Salaries Setup

To start using the partial import process, you must first complete two steps:

1. Create an Accrued Salaries account in the Chart of Accounts
2. Establish this new Accrued Salaries account as the Default Account for the process

1) Create an Accrued Salaries account in the Chart of Accounts

For most PROCAS clients, an Accrued Salaries account must be created in the Chart of Accounts to accurately track the recording and reversing of the partial labor journals created. This should be separate from your typical 2200 - Salaries and Wages Payable account, so that your payroll information is not affected.

We recommend using 2205 - Accrues Salaries - Partial Timesheets if available, with the following fields completed in the Chart of Accounts:

Accounting --> Setup --> Chart of Accounts

Code --> 2205

Description --> Accrued Salaries - Partial Timesheets

Account Class --> 23 - Accrued Expenses

Financial Statement Line Item --> 212 - Accrued Compensation

Cash Flow Line Item --> 115 - Increase (Decrease) in Accrued Expenses

Cost Element --> 22 - Salaries Payable

Chargeable and Active --> Checked

All other Chart of Accounts columns can be left blank. Save the new account when finished inputting the data.

2) Establish this new Accrued Salaries account as the Default Account for the process

Now that our Accrued Salaries account has been created, let's specify for the system to use it when creating partial labor journals via the Default Accounts form.

Accounting --> Setup --> Default Accounts

On this screen, fill in the account created under the Accrued Salaries section and save the screen. At this point, all of the setup has been completed to begin using the process.

Partial Timesheet Import Process

To begin the partial import process, let's navigate to T&E Admin --> Export Timesheet Data. On this screen, we will be given the option of which timesheet period we would like to partially export.

In this example, we are going to export timesheet data tied specifically to charge codes that roll up to Invoice Task 10003.000.00.000. My timesheet periods are built semi-monthly for payroll, however my contracting officer requires that I invoice on the 7th and 22nd of each month.

By selecting, Export Partial we will be taken to a selection screen to specifically filter the timesheet data we are looking for:

Work Date From - Read-Only field, which represents the start date of the timesheet period

Work Date To - Editable field, which is overwritten to specify the last date you would like to export timesheet data through

Invoice Task(s) - Drop down list of available invoice tasks to choose from

• Selecting ALL will export all timesheet data through the Work Date To field
• Selecting a Specific Invoice Task will limit the data through the Work Date To field

Select Export to send the data over to the next step of the process, Process Timesheets.

Process Timesheets

After navigating to Accounting --> Labor --> Process Timesheets, you will notice that your specific selection has populated for labor distribution.

In the below example, 5 employees populated with their hours input through the 7th of August. At this point in time, we can review to make sure these hours are correct.

The biggest field to note in this process is the newly added Base Period Hours field, which allows for an accurate effective rate calculation to take place for Cost Plus Contracts. This field will populate with the default hours listed for the pay frequency of the timesheet period, but can be manually modified if needed. If you are billing Time & Materials, you do not need to worry as much about changing this field. It is used as the base for the hours imported for salaried employees, which is important for billing at cost.

Select Next followed by Create to process your labor distribution.

Labor Journals

Processing labor distribution has created 2 journal entries for each employee:

1) The 1st Journal is the cost breakdown for the partial period on the date recorded in the "Work Date To" field.

Debit - Direct Labor for Task 10003.001.00.105 which can now be billed as of August 7th.

Credit - Accrued Salaries - Partial Timesheets

2) The 2nd Journal is the reversal of the first entry on the following day.

Credit - Reversal of Direct Labor on August 8th

Debit - Reversal of Accrued Salaries on August 8th

The partial timesheet import process was built this way for the following reasons:

• You have all your cost information to invoice your client at the day required for billing.
  • However, this is reversed the next day so that your financials are not duplicated when you import your full period later in the month.
  • Your Direct Cost Report will tie directly to the period being invoiced, which can be used as support for your invoice.
• Accrued Salaries is separated from Salaries and Wages Payable so that your accounting records aren't muddied up as you reconcile payroll.

For additional help, you can select the Help Icon in the upper right-hand corner of each screen to receive detailed explanations for each step of the process. You can also reach our consulting team at consulting@procas.com.

Tracking employees' paid time off, vacation, and sick leave balances can be one of the most headache-inducing functions of being an accountant. For government contractors, recording accurate PTO/vacation and sick leave accruals is crucial to calculate correct indirect rates each accounting period and stay in accordance with GAAP.

At PROCAS, we've tried to simplify the process by automating as much as possible. To help our clients, we've created 2 videos breaking down the standard PTO process using PROCAS:

1. PTO Setup 
2. The PTO Accrual Process

PTO Setup

PTO Setup is the backbone of the PTO Accrual Process. It needs to be completed before you can begin tracking employee's PTO/vacation and sick leave balances in the system.

1. Intro                                                                          (0:00 - 1:17)

2. PTO Setup                                                               (1:18 - 4:17)

• Completed - During initial implementation of PTO tracking
• Modified - Only if there is substantial change to PTO policies or the chart of accounts
  • We recommend contacting your consultant before making modifications

3. PTO Accrual by Person                                         (4:18 - 5:45)    

• Completed - As you onboard employees
• Modified - When employees' default hours need to change

4. PTO Project/Task Creation                                  (5:46 - 9:23)

• Completed - Every calendar year
• Modified - Original 3 WBS levels never modified after being recorded in the general ledger
  • Can add 4th and 5th levels if needed

5. Work Authorization by Task                                 (9:24 - 11:37)

• Completed - Every calendar year
• Modified - When employees are on-boarded or terminated
• Updated - Automatically with each accrual entry as seen in next video

The PTO Accrual Process

The PTO Accrual process is the automated process you will use each timesheet period to calculate and track employees' PTO/vacation and sick leave hours. This process starts with the selection of employees, followed by the addition of newly accrued hours and updating of balances, ending with the automatic adjustment(s) made to financial statements to account for these changes.

All steps of this process are completed each timesheet period and modified routinely.

1. Intro                                                                            (0:00 - 0:43)

2. Process PTO Hours Accrual                                  (0:44 - 3:13)

3. PTO Hours Accrual Journal                                   (3:14 - 8:16)

    a. Updated Work Authorization by Task               (8:17 - 10:07)

4. PTO Accrual Report                                                (10:08 - 13:31)

5. Accrual Entry in General Journal                          (13:32 - 14:21)

For additional help, you can select the Help Icon in the upper right-hand corner of each screen. This will give you specific instructions for completing each step as well as additional definitions for what is being presented.

1. Intro Sessions                                                                     (0:00 - 1:09)

2. Accounts Receivable Report                                            (1:10 - 2:56)

3. Record Client Payments                                                    (2:57 - 6:23)    

4. Finalizing Cash Receipt Journal Entries                         (6:24 - 8:34)

Entering client receipts has been made easier than ever with our new Record Client Payments process. This process starts with a selection screen of what bills are outstanding, followed by the generation of a cash receipts journal transaction to record the amount of cash received in your bank account.

If you have experience paying vendor invoices using PROCAS, you should be familiar with the touch and feel of the new receipt forms. If not, follow along with the detailed breakdown below.

Recording Client Payments

To access Record Client Payments, go to Accounting --> Accounts Receivable --> Record Client Payments.

If you are using our integrated invoicing process for billing, or are recording revenue transactions manually, this screen will show you what bills need to be collected.

By default, the populated lines will only show outstanding amounts recorded against receivable accounts. If a receivable has already been collected and recorded, it will not appear.

This detailed information will update when you select the "Search" button and can be filtered by Receivable Account, Client, and Task.

Because there is only so much space here for a screenshot, I spliced the above image into the two key sections:

1) Descriptive Journal Information

Most columns in the first half of each row are read-only and provide descriptions for the Client, Payment Method, Account, Task (WBS), Transaction, Transaction Date, Invoice Number, and Invoice Date for each entry recorded in the system.

Select the checkboxes on the furthest left column to process the payments you have received from your client(s).

Tip 1 - You can filter or sort by each column to help find the receivable you are looking to process.

Tip 2 - You can "select all" or "deselect all" checkboxes simultaneously using the checkbox in the header.

2) Payment Amounts

Once you've selected the entries to relieve, it's time to determine how you would like to apply the cash received from your client(s). These columns on the right side of the form are more interactive and are broken down as follows:

Invoice Amt - The original invoiced amount recorded on the sales journal. (Read Only)

Open Amt - The remaining balance open to be received (Read Only).

• This amount is original invoice amount less any payments already received.

Payment Amt - The amount of cash received (Editable).

• Defaults to the Open Amt.
• Should be overwritten if a different amount of cash was received from your client.

Remaining - The remaining balance of the Open Amt less the Payment Amt entered today (Read Only).

• This amount will most often be $0.00.
• If this amount is not $0.00,
  • Do nothing, this balance will remain in your AR for your client.
  • Proceed to one of the following checkboxes: Write-Off or Reclass.

Write-Off - If selected, the Remaining Amt will be written off to your default write off account.

• Example 1 - If you do not expect to collect the remaining amount, write it off to 9803000U - Bad Debt
• Example 2 - If you collected slightly more than expected, and your client does not expect you to record the difference to unearned revenue, write it off to 49000000 - Other Revenue (Immaterial)

Reclass - If selected, the Remaining Amt will be reclassed to your default reclass account.

• Example 1 - If you received too much cash from your client, reclass to unearned revenue account 2600 - Advances from Customers on Contracts
• Example 2 - If you do not expect to collect the remaining receivable for an unknown amount of time, reclass to 1240 - Accounts Receivable - Doubtful Accounts

Once the Payment Amts have been determined for each payment being received, proceed to the "Next" button in the bottom right-hand corner of the screen.

Processing Receipts

Once you've selected the receivable entries to be relieved, the next step is to process these receipts.

Payment Date will default to today's date. The Cash, Write-off, and Reclass accounts will auto-fill with your Default Accounts established under Setup --> Account Structure --> Default Accounts. These default accounts should be established before processing receipts.

You may overwrite any of these defaults if needed, and add a Cash Receipt Transaction Description if you'd like a header description to be added to the final journal entry transaction(s).

You also have the option to create one journal entry transaction for the receipts received, or multiple broken out by client, task, or invoice. We recommend creating a receipts journal transaction for each deposit recorded by the bank.

• Example 1 - If checks are received by multiple clients and recorded on one bank deposit slip, then one cash receipts journal transaction should be recorded.
• Example 2 - If payments are received by separate EFT or ACH deposits, then multiple cash receipts transactions should be recorded.

Recording one transaction per bank deposit will simplify the Bank Reconciliation process. Select the "Next" button to proceed to the Transaction Preview screen.

Cash Receipt Journal Preview

The final step in the receipt process is the preview screen to create your entry. This screen displays your total Cash Balance as well as Total Payment Received per bank deposit. You can add descriptions by line item if preferred, or select "Back" if any information looks incorrect.

If everything appears in order, select "Create" to create your Cash Receipts Journal Transaction(s).

Cash Receipts Journal Transaction(s)

Congrats, your cash receipt journal entries have been created in PROCAS! To access them, go to Accounting --> Accounts Receivable --> Cash Receipts Journal. If you need to modify your entries in any way, they can be edited on this screen.

For further assistance using Record Client Payments, you can reach out to us at consulting@procas.com.

At PROCAS, it is our mission to improve the quality of life of our clients by simplifying government contract accounting. In order to accomplish this, we believe that we should provide the best solution of presenting meaningful data to our clients in the most efficient way possible. Because what good is having a DCAA compliant accounting system if it is a hassle to get data out of it?

The PROCAS Accounting Dashboard helps you manage your business with an easy to read snap shot of your company's real-time financial data, with no additional setup or configuration required.

The below video and post is broken into 7 Sections:

1. Cash
2. Accounts Receivable
3. Accounts Payable
4. Income Statement
5. Balance Sheet
6. Financial Ratios
7. Dashboard Default Controls & Troubleshooting

To access the dashboard, please go to Accounting --> Dashboard --> Accounting Dashboard in the menus.

Cash

Getting ready to process payroll? Pay vendor invoices? Deposit a client payment? This tile will give you an accurate balance of how much cash is on hand.

Graph 1 - Cash Flow over a Period of Time

• Default Date Range - Current Year Beginning Period to Current Period
  • Range can be modified using slider bar control defined under Income Statement section
• Tool Tips - Hovering over each month with mouse in the area graph will give accurate cash balance ending each period
• Color - Dark Blue (Indigo) = Assets
• Report - Selecting "Cash" title at the top will generate Statement of Cash Flows for date range
  • Report has full drill through capabilities to Account, Vendor/Client, & Transaction level details

Graph 2 - Cash Balance as of Today's Date

• Default Date - Date & Time Dashboard is generated (Today)
• Tool Tips - Hovering over each cash account (displayed by different shade of dark blue) will provide accurate balance as of today
• Colors - Shades of Dark Blue (Indigo) = Assets

Accounts Receivable

Manage your cash flow by staying on top of what’s owed to your organization. This tile will show you how many client payments still need to be collected and how long they've been outstanding.

Graph 1 - Outstanding Amounts Aged from Invoice Date

• Default Date - Date & Time Dashboard is generated (Today)
• Range - 30 day bars sorted by invoice date
  • Invoice date is stored on the sales journal where the revenue and receivable are recorded
• Tool Tips - Hovering over each bar will give accurate receivable total for specified time frame
• Color - Dark Blue (Indigo) = Assets
• Report - Selecting "Accounts Receivable" title at the top or "Total Outstanding" on the side will generate Accounts Receivable report for today's date
  
  • Report defaults to transaction level detail to be able to see all transactions that make up the totals

Graph 2 - Overdue Amounts Aged from Due Date

• Default Date - Date & Time Dashboard is generated (Today)
• Range - 30 day bars sorted by due date
  • Due date is established on the client record under "Payment Terms"
• Tool Tips - Hovering over each bar will give accurate receivable total for specified time frame
• Color - Dark Blue (Indigo) = Assets
• Report - Selecting "Total Overdue" on the side will generate Accounts Receivable report for today's date
  
  • Report defaults to transaction level detail to be able to see all transactions that make up the totals

Accounts Payable

Don't get behind on bills owed to your vendors. This tile will show you how many invoices still need to be paid and how long they've been outstanding.

Graph 1 - Outstanding Amounts Aged from Invoice Date

• Default Date - Date & Time Dashboard is generated (Today)
• Range - 30 day bars sorted by invoice date
  • Invoice date is stored on the purchases journal where the expense and liability are recorded
• Tool Tips - Hovering over each bar will give accurate payable total for specified time frame
• Color - Red = Liabilities
• Report - Selecting "Accounts Payable" title at the top or "Total Outstanding" on the side will generate Accounts Payable report for today's date
  
  • Report defaults to transaction level detail to be able to see all transactions that make up the totals

Graph 2 - Overdue Amounts Aged from Due Date

• Default Date - Date & Time Dashboard is generated (Today)
• Range - 30 day bars sorted by due date
  • Due date is established on the vendor record under "Payment Terms"
• Tool Tips - Hovering over each bar will give accurate payable total for specified time frame
• Color - Red = Liabilities
• Report - Selecting "Total Overdue" on the side will generate Accounts Payable report for today's date
  
  • Report defaults to transaction level detail to be able to see all transactions that make up the totals

Income Statement

Use the Income Statement graph to monitor the overall profitability performance of your company. This tile breaks down your organization's revenue, expenses, and net income over a period of time.

Graph 1 - Income Statement

• Default Date Range - Current Year Beginning Period to Current Period
  • Range can be modified using slider bar control below
• Tool Tips - Hovering over each income statement item will give accurate balances as of end date of period range
• Color - Light Blue = Revenue, Orange = Expenses, Green = Net Income
• Legend - Clicking Revenue, Expenses, and/or Net Income will remove or add each bar to the graph
• Report - Selecting "Income Statement" title at the top will generate Income Statement as of end date of period range
  
  • Report has full drill through capabilities to Account, Vendor/Client, & Transaction level details

Graph 2 - Revenue Area Graph

• Default Date Range - Inception-to-Date Period to Current Period
• Tool Tips - Hovering over each period will give accurate revenue numbers as of end date of period 
• Color - Light Blue = Revenue

Dashboard Date Range Selection - Slider Bar

• Beginning Period - Slide first button left or right to change the beginning date period
  
  • First possible period = Inception-to-Date Period
  • Tiles Updated when Modified - Total Cash by Month, Income Statement, Bottom 3 Financial Ratios
• Ending Period - Slide the second button left or right to change the ending date period
  • Last possible period = Current Period
  • Tiles Updated when Modified - Total Cash by Month, Income Statement, Balance Sheet, Top 3 Financial Ratios

Balance Sheet

Use the Balance Sheet graph to quickly see the distribution of your company’s resources and obligations. This tile breaks down your organization's assets, liabilities, and owner's equity.

Graph 1 - Balance Sheet

• Default Date Range - Current Year Beginning Period to Current Period
  • Range can be modified using slider bar control defined under Income Statement section
• Tool Tips - Hovering over each balance sheet item will give accurate balances as of end date of period range
• Color - Dark Blue (Indigo) = Assets, Red = Liabilities, Purple = Owner's Equity
• Report - Selecting "Balance Sheet" title at the top will generate Balance Sheet as of end date of period range
  
  • Report has full drill through capabilities to Account, Vendor/Client, & Transaction level details

Financial Ratios

Key Performance Indicators are right here at a glance to help you gauge your company's liquidity, profit margins, and growth in earnings. What is considered "Good" varies by industry and company, but some definitions and common suggestions for interpreting the ratios are provided here:

Ratio 1 - Quick Ratio

• Formula - Quick Assets divided by Current Liabilities as of the selected end date
• Colors - Dark Blue (Indigo) = Assets, Red = Liabilities
• Defined - Quick Assets are defined as Cash, Marketable Securities and Accounts Receivable
• Interpretation - A Quick Ratio should generally be ≥ 1:1
  
  • Lower ratios may indicate that the company does not have enough short-term assets to cover its short-term liabilities.

Ratio 2 - Current Ratio

• Formula - Current Assets divided by Current Liabilities as of the selected end date
• Colors - Dark Blue (Indigo) = Assets, Red = Liabilities
• Interpretation - A Current Ratio should generally be ≥ 1:1 and ≤ 3:1
  • Lower ratios may indicate that the company does not have enough short-term assets to cover its short-term liabilities.
  • Higher ratios may indicate that assets are not being used efficiently.

Ratio 3 - Debt to Equity

• Formula - Total Debt divided by Total Owner's Equity as of the selected end date
• Colors - Red = Liabilities, Purple = Owner's Equity
• Interpretation - A Debt to Equity Ratio should generally be ≤ 1.5:1
  • Higher ratios may indicate that a company is too highly leveraged with debt and may not be able to generate enough cash to satisfy its debt obligations.

Ratio 4 - Profit % of Revenue

• Formula - Net Income divided by Revenue for the selected date range
• Colors - Green = Net Income, Light Blue = Revenue
• Interpretation - Profit % of Revenue should generally be between 4% - 25%, depending on contract type(s) and the business model.

Ratio 5 - Profit % of Costs

• Formula - Net Income divided by Expenses for the selected date range
• Colors - Green = Net Income, Orange = Expenses
• Interpretation - Profit % of Costs should generally be between 4% - 33%, depending on contract type(s) and the business model.

Ratio 6 - Return on Equity

• Formula - Net Income for the period divided by Average Equity for the selected date range
• Colors - Green = Net Income, Purple = Owner's Equity
• Defined - Average Equity is defined as the sum of beginning and ending equity divided by 2.
• Interpretation - A Return on Equity Ratio should generally be ≥ 14% per year (the long-term average of the S&P 500).

Dashboard Default Controls & Troubleshooting

This item is included because it must be completed to have the dashboard populate. If you do not complete this screen, it is possible you will see the following error when clicking on the dashboard:

To access the default screens for the dashboard, please navigate to the following:

Accounting --> Dashboards--> Report Defaults  - (should be located right below the Accounting Dashboard)

In this menu, update the following 6 default fields to populate relevant data within a matter of seconds on the dashboard:

General

1.

• Established one time - beginning date for slider bar under the income statement.

2.

• Updated once a month - used for reference/informative purposes.
• Should be updated each time an accounting period is closed.

Reporting Period

3.

• Updated once a month - prior year period to compare to current year period.

4.

• Updated once a month - current year accounting period for reporting purposes.
• Ending date for the slider bar under the income statement.
• Should typically be the period after the "Books Good Through Date."

Reporting Year

5.

• Established once a year - prior accounting year for reporting purposes.

6.

• Established once a year - current accounting year for reporting purposes.

Help & Explanations -

• For more details on establishing any of the 6 defaults, please click the help icon in the upper right hand corner of the menu.
• The help icon can also be selected on the Accounting Dashboard for more explanations on how the tiles are calculated.

For any additional help utilizing the dashboard, please reach out to your PROCAS Consultant.

As always, operating DCAA compliant accounting software not only incorporates the software itself, but how it is used. Please be sure to check with your administrative staff for an explanation of how your policies and procedures align with our government contract accounting system.

Every January, accounting staff & business owners walk into the same old confusing process as they wake up from their holiday slumbers…

*Grabs coffee and begins annual research*

“What is a 1099 again?”

“How do I determine who should receive a 1099?”

“What are the different types of 1099s that need to be reported?”

“Ok… (takes deep breath), what in the world is a 1099-NEC?

WAIT A SECOND, WHEN DID THE PROCESS CHANGE?!!

“I don’t remember ever having to split out 1099-MISC payments from 1099-NEC (sighs).”

*Completes reading new rules*

"I think I get it now, time to print these forms out.”

“THAT’s right, I can’t print them online. Need to swing by Staples to pick some up.”

*Purchases 1099-MISC & 1099-NEC forms*

“I only bought a box of 50 forms, why are there a billion papers in here.”

"Oh yeah... I need to complete 5 form types for each vendor (facepalm)."

“When are all of these due and who do I send them to?”

CAN I GET IN TROUBLE IF I MESS THIS UP??

Fear not! We will break down this process in detail below and explain how PROCAS can help you simplify the reporting requirements. So, keep the Tylenol up in the cupboard, we aren’t going to need it!

The IRS offers a comprehensive breakdown of the changes made to 1099s and all associated forms, deadlines and penalties.

Editor's Note

This post takes into account the creation of the 1099-NEC (Nonemployee Compensation) form and changes made to the 1099-MISC forms by the IRS for the 2020 fiscal year, covered under the Forms & Deadlines section.

The IRS offers a comprehensive breakdown of the changes made to 1099s and all associated forms, deadlines and penalties.

If you have been using PROCAS to produce your 1099s in the past, we have already done the work in adjusting your system to the new forms and alignment. If not, proceed to learn how the process is completed!

What is a 1099 and why is it important?

1099-NEC & 1099-MISC forms are used to track income of organizations who are not established as corporations (or LLCs taxed as C or S corps). For most companies, 1099 forms will be used to provide an accurate representation of how much non-employees, vendors, sub-contractors, and consultants have been paid throughout the prior year. Because these people and businesses do not receive W-2’s for work performed, 1099s are what the IRS depends on to know how much they owe in taxes for the calendar year.

Who receives a 1099?

Determining who receives a 1099 can be a tricky process. To help, we’ve broken the decision-making tree into the following points:

1) Is the person in question an employee of your organization?

1. YES – No need, they should have received a W-2.
2. NO – Independent contractors and consultants will most likely need a 1099, proceed to Question 3.
3. NOT SURE – Consider the following questions:
   1. Do you provide benefits to this individual?
   2. Do you provide equipment, office space, or materials for the individual to complete their job?
   3. Do you reimburse business expenses incurred by the individual?
   4. Are you the sole client or primary client of the individual? And do you completely control their weekly workflow?
4. NOT SURE – If you answered NO to all the above sub-questions, proceed to Question 3.
5. NOT SURE – If you answered YES to any of the above sub-questions, you may be considered that individual’s employer in a court of law and may need to start providing W-2 information. Consider seeking a labor lawyer’s advice.

2) Is the vendor you purchased services from a corporation?

1. YES – No need to send a 1099.
2. NO – Sole Proprietorships and Partnerships will most likely need a 1099, proceed to Question 3.
3. NOT SURE – LLC’s are the most confusing of the bunch. To determine how the company is taxed, please send a W-9 to that vendor’s accounting staff. Once returned,
   1. If taxed as S Corp or C Corp, no need to send 1099.
   2. If taxed as sole proprietorship or partnership, proceed to Question 3.

3) How much money was paid to individual or vendor?

1. Anything less than $600 total for the calendar year does not require a 1099.
2. Any payments totaling $600 or more will require a 1099.
3. Common Exceptions:
   1. $10 or more in royalties will require a 1099
   2. In general, payments made to law firms will require a 1099
   3. If paid via credit card, a 1099 is not required (even in excess of $600). The credit card company will take care of the reporting for you.
   4. Business expense reimbursements for employees will not require a 1099.

Forms & Deadlines

For fiscal year 2020, the IRS has separated out nonemployee compensation from other standard types of miscellaneous payments into two forms – 1099-NEC & 1099-MISC.

1099-NEC forms now require the following payments be submitted:

• Cash payments made to nonemployees
• Prizes and awards for services performed by nonemployees
• Cash payments for fish
• Payments by a federal executive agency for services
• Gross oil and gas payments for a working interest
• Taxable fringe benefits for nonemployees

All other types of payments will still be listed on the 1099-MISC forms. Alignment of the remaining boxes on this form has shifted, which we have already adjusted for you in PROCAS! Please see Utilizing PROCAS to complete your 1099s for how we’ve modified to the new forms.

1099 Forms

Each set of forms contain 6 parts to be filled out and sent to their appropriate recipient(s):

1. Copy A - For Internal Revenue Service Center
2. Copy 1 - For State Tax Department
3. Copy B - For Recipient
4. Copy 2 - To be Filed with Recipient's State Income Tax Return, When Required
5. Copy C - For Payer
6. 1096 - Completed with each set of 1099s

Deadlines

While these forms can be generated around the same time, they typically are sent separately at different deadlines:

1. January 31st
1. File 1099-NEC Copy A forms and 1096 with the IRS
1. DO NOT mix in 1099-MISC Copy A forms
2. Can also e-file if preferred
2. Send 1099-NEC Copy B forms to recipients
2. February 28th
1. File 1099-MISC Copy A forms and 1096 with the IRS
2. Send 1099-MISC Copy B forms to recipients
3. March 31st
1. Deadline to e-file to the IRS for 1099-MISC Copy A forms and 1096

PENALTIES

Failure to submit accurate 1099 forms by the required deadlines can be costly for businesses. The below charts are taken from the IRS's publication on potential penalties and fines for failure to submit 1099s.

Large Businesses with Gross Receipts of More Than $5 Million

Small Businesses with Gross Receipts $5 Million or Less

As you can see from the above charts, proper submission of 1099 forms to the IRS is one that should not be taken lightly.

Utilizing PROCAS to complete your 1099s & 1096s

PROCAS currently supports four types of 1099s: 1099-NEC (nonemployee compensation), 1099-MISC (all other payments), 1099-INT, and 1099-DIV, as well as 1096s. Each form can be generated out of the system by following these 3 steps:

1. Determining which vendors/subcontractors require 1099s
2. Establishing 1099 form type and box by vendor/subcontractor
3. Generating 1099/1096 forms from PROCAS

1) Determining which vendors/subcontractors require 1099s

In order to find out who you paid money to in the prior year, please go to the following:

Accounting --> General Ledger --> General Ledger

Here, use the parameters next to the orange arrows below to generate a report for cash payments made in the following year.

• If you conduct electronic batch payments (ACH or EFT), open up the account range to include AP accounts along with cash.

Once you’ve printed your report, please follow the above section “Who receives a 1099” to whittle down your list of possible vendors to those who should receive a form.

2) Establishing 1099 Form Type & Box by Vendor or Subcontractor

Now that you have your list of vendors and subcontractors, time to label their records as to which type of form they should receive. Please navigate to:

Setup --> Purchasing --> Vendors

And select the “Find” button or “F8” function key to begin searching for those vendors/subs. Once on the record of an applicable vendor/sub, select the “Payment Info” tab of the record to locate a box called “1099 Type & Box.”

If you click in this box, you can then select the “Lookup” button or “F9” function key to see the list of possible 1099 types.

From the above list, make the appropriate selection for each vendor/subcontractor as needed.

Editor's Note - 2021

If you have established this list in prior years, we have remapped your vendors to the new form & box types. 1099-MISC07 has been modified to 1099-NEC01 for Nonemployee Compensation and remaining 1099-MISC boxes have been modified for the new form alignment. You do not have to complete any extra work in remapping existing vendors!!

3) Generating 1099 & 1096 forms from PROCAS

Once all 1099 types and boxes have been determined, navigate to the final menu:

Accounting --> Accounts Payable --> Forms 1099/1096

This screen will be broken into two separate parts to get the appropriate items needed to print your forms:

The header section of Forms 1099/1096 has specific parameters to determine which items will generate in the detail grid:

• Reporting Year Date - Use the prior calendar year for as is required for reporting 1099/1096 amounts.
• Cash Account - Use the cash account recorded in the GL for payments made to each vendor/sub (if left blank, all accounts will generate).
• Batch Liability Account - If you make payments in batch from your bank account, enter the liability account used here. Leaving this area blank will populate all possible payments.
• 1099 Type - Choose applicable 1099-NEC, 1099-MISC, 1099-DIV, or 1099-INT.
• Minimum Amount - This will limit the results by taking the sum of all payments by vendor, and exclude them if the total is less than the minimum entered.
• Search - Will populate below details.

In this detailed grid, select the payments made to each vendor if you are looking to include them on your forms. When all appropriate rows have been selected, print the proper 1099 or 1096 report from the below report bar.

• Each column has the ability to sort items if you click the column header
• Each column also has the ability to filter items if you select the filter icon to the right of each column header

Extra Help & Form Alignment

For additional help completing your 1099/1096 forms using PROCAS:

• In the upper right hand corner there is a "?" symbol, which will provide in-system help for detailed instructions on any of the menus!
• Feel free to reach out to our Support Team at support@procas.com
  • We can help align your report forms to your printer specs as well as help explain the process.

We are excited to bring you some long-awaited news of the PROCAS Accounting upgrade! Our entire team has been very busy this year working on the development of the upgraded accounting software. We are grateful for the many clients that agreed to jump on board early and help us improve the usability and functionality of the software before a general release.

The upgraded version, while closely based on the existing version that you are used to, is accessed directly from a web browser. Since it is web-based, the user interface is quite different than what you are currently familiar with. We also have the flexibility to improve how things work and to continuously add new features and functions.

Upgrade Logistics

We are slowly transitioning our clients to make sure everyone gets one-on-one time with a consultant to help get acclimated to the new user interface and many of the new features. Part of the transition includes an import of all your existing data into the new system. This means that you will maintain all the general ledger transaction, invoice history, and setup details that you have now. This also means that you can transition during any time of the year, regardless of where you are in the accounting cycle.

By the way, there is no added cost to upgrade—not even the time spent with your consultant! We want all our clients to enjoy the new software without an unplanned hit to their bottom line.

Our transition schedule is full through the end of this year, and we are looking to start adding clients to the list for 2020. If you are interested in a demo to learn about new features, or how to get on the transition wait list for 2020, send us an email at feedback@procas.com.

From all of us at PROCAS, we would like to wish you a wonderful holiday season!

We look forward to hearing from you and working with you soon!

- The PROCAS Team

Have you ever wondered how to set up your indirect rate structure in PROCAS? The good news is, if you’re a new contractor, and you don’t have a rate structure yet, the system already has a default setup that works for most of our clients. It’s a standard 3-tiered structure with (1) fringe, (2) overhead applied to direct labor plus fringe, and (3) G&A.

If you are more experienced, you may want to make changes to your rate structure from one year to the next but don’t know what options to pick in the system. One nice thing about how it works in PROCAS is that it is easy to use our ‘point and click’ setup to make changes and then test the calculation.

There are 2 basic setup elements the system needs to calculate the rates—(1) selections on the Rate Calculation Setup form and (2) the Cost Pool assigned to each expense account in the Chart of Accounts. Generally, your selections determine how many rates you have, what intermediate rate allocations are made, and what makes up the bases for each rate. Every expense account you use is assigned to a cost pool on the Chart of Accounts form. The Cost Pool assigned determines what type of expenses is being accumulated in that account.

Since the default chart of accounts already has appropriate cost pools established for each expense account, I will focus on the options on the Rate Calculation Setup form.

Rate Calculation Setup form – Tab 1:

Establishes defaults used when calculating rates.

Date Range – we recommend selecting Accounting Year since you must calculate your indirect rates for the accounting year-to-date for DCAA compliance. Management may want to see rates by Accounting Period but that should be for internal purposes only.

Costs to include in Pools – we suggest using Allowable Only as your default. This selection will exclude unallowable costs from the pools for calculating your claimed rates. When Allowable & Unallowable is selected, you are calculating your full rates which include all your costs. While you need to know your full rate to make informed business decisions, you cannot claim your full rate for reimbursement from the government.

Transactions to include – using Posted & Unposted transactions as your default will ensure everything recorded in the general ledger is included when you calculate your rates. Choosing Posted Only will ignore any transactions that are not posted within the period and could be misleading.

Rate Calculation Setup form – Tab 2:

Determines how many rates you have for each cost pool.

We always recommend keeping your rate structure as simple as you possibly can, for as long as you can. Using all consolidated rates means you have only one rate per cost pool. However, at some point, you may need to make some changes. This tab gives you the flexibility of establishing rates by division, location, and/or work site, in any combination.

Most often, we see clients moving from a consolidated Overhead rate (pictured above) to Overhead calculated by Site. This allows for more than one overhead rate—typically one for company site and one for client site. Keep in mind, that you will have to track your costs at whatever level you select. Since switching to a 2 Overhead rate structure is common, we start our clients off on day one by tracking direct and overhead expenses by company site (e.g., 100 cost center) and client site (e.g., 105 cost center). This makes the transition to the 2 Overhead rate structure seamless. All you have to do is select the Site checkbox in the Overhead row and you are ready to go.

Rate Calculation Setup form – Tab 3:

Determines whether you have a dollar or hour/unit base for each cost pool.

Most commonly, we see clients using a $ Base for each cost pool. Using a dollar base is simplest. It does not require any additional work on your part. The system will just need the amounts you’ve already recorded in the general ledger.

However, quite frequently we see Facilities with an Hour/Unit Base. In many cases, it makes sense to use square footage or head count as the base for Facilities rather than dollars. Note that if this is your selection, you will also need a Triggers Journal entry dated the first day of your accounting year, so the system knows how many units to use and how to allocate the office-related costs to Overhead and G&A. We have special accounts already established in the default Chart of Accounts to use for this purpose.

Rate Calculation Setup form – Tab 4:

Determines what pool to put your Material Handling and Subcontract Administration costs in.

In PROCAS, you can track your Material Handling (MH) and Subcontract Administration (SA) costs in your general ledger separately by account while keeping the costs in either the Overhead Pool or G&A Pool for rate calculation purposes. Tracking the costs will provide management with valuable cost information and have you set up to easily transition to a Value-Added G&A rate.

The selections in the screenshot above are a great place to start. Keep the material handling and subcontract administration costs in your G&A pool for now. If you ever need it, you can easily change it.

Rate Calculation Setup form – Tab 5:

Determines what makes up your Facilities base and what to include in your Overhead Pool and Base.

There’s a lot more to the options on this screen so let’s tackle them one at a time.

Facilities

Include Employee Labor in Facilities Base – if selected, productive employee company site labor is your base. If you selected a $ Base on Tab 3, the system will use the total employee labor dollars. If you selected Units/Hours Base, the system will use the total employee labor hours.

Include Contract Labor in Facilities Base – I don’t see this often, but if you have contractors that use your facilities, you can include those labor costs in the base to bear some of the facilities burden. Again, the $ or Units/Hours base selected on Tab 3 is a factor in the calculation.

Include Non Labor Facilities Base in Facilities Base – if selected, you must also have the Units/Hours base selected on Tab 3. This means you are using something like square footage, head count, or some other percentage to allocate the facilities costs to Overhead and G&A. You also must create a Triggers Journal transaction dated the first day of the year to record the unit allocations.

Overhead

Include Fringe Benefits on Direct Labor in Overhead Pool – if selected, you have a 2-tier rate structure—overhead and G&A. Fringe is an intermediate rate and is not stated separately on invoices to your clients.

Include Facilities Costs Related to Direct Costs in Overhead Pool – if selected, the facilities costs allocated to direct company site labor are allocated in the Overhead Pool. This is the most common selection.

Include Direct Labor in Overhead Base – this option should always be selected. Direct labor is the standard overhead base.

Include Contract Labor in Overhead Base – this option is rare, but if you have contractors that use your company’s contract support resources, you can include those labor costs in the base to bear some of the overhead burden.

Include Fringe Benefits on Direct Labor in Overhead Base – this option should be selected if you have a 3-tier rate as described in the beginning of this article. Fringe is stated separately on invoices to your clients and overhead is applied to direct labor plus the allocated fringe. If this option is not selected, you also have a 3-tier rate. Fringe is stated separately on invoices to your clients, but overhead is only applied to the direct labor costs.

Rate Calculation Setup form – Tab 6:

G&A Base options

As you can see in the screenshot above, there are several selections to choose from for your G&A base.

Total Cost Input Base – this is the most common selection. Select this when all your costs (excluding G&A) are the G&A base. What you get with this option is all your direct costs plus the allocated facilities, fringe and overhead costs as your G&A base.

Value Added – No Materials – if your rate structure includes a separate Material Handling rate (Material Handling Pool option is selected on Tab 4), you must select this option. This will exclude the direct materials from the G&A base. Instead, the direct materials are the base for the MH rate.

Value Added – No Subcontracts – if your rate structure includes a separate Subcontract Administration rate (Subcontract Admin. Pool option is selected on Tab 4), you must select this option. This will exclude direct subcontract costs from the G&A base. Instead, the direct subcontract costs are the base for the SA rate.

Total Direct Cost – I can honestly say that I have never seen a client select this option. That doesn’t mean it’s not right. It’s there if you need it. Only direct costs will be your G&A base. This means that you don’t have a separately stated fringe or overhead rate. Basically, everything ends up in the G&A pool with this option.

Direct Labor Base – I have seen this option selected one time in my career. Again, it could make sense in certain circumstances.

The default chart of accounts is already set up with the appropriate Cost Pools for each expense account. This is how the system knows what type of cost each account contains (direct, fringe, facilities, overhead, G&A, material handling, subcontract administration, etc.). That, along with the selections on the Rate Calculation Setup form, informs the system of where each amount goes in the various pools and bases when the rates are calculated.

I cannot stress enough how important it is for DCAA compliance to be consistent with how you accumulate and allocate your costs. The way you bill the government for reimbursement of your direct and indirect costs must match how your rates are calculated. If you are ever unsure of what selections to make, please reach out to one of our PROCAS consultants for help.

If you work in the system with multiple users or tend to open several screens at a time you may run into a loop of error messages as you try to add, change, or edit something in a journal. Read on to find out what the messages mean and how to get them to go away so you can continue working (and prevent them from occurring in the future).

Do the following loop of error messages look familiar to you?

If so, then what’s important is identifying which type of error (out of the two possibilities) you are receiving. To troubleshoot the cause of the error, you should click "OK" on image 1, which then brings you to image 2. From here press the highlighted arrow that is shown on image 2, which will take you to one of the following two screens that provides the reason for your session being locked.

Option 1: Record already locked by this session

When it reads “Record already locked by this session,” it tells us that you (the user) are trying to edit the same transaction twice. You essentially have locked yourself out. When you are attempting to edit a transaction that is already open, the system doesn’t know where to look.

To resolve:

To get yourself unlocked, you must log out completely by using the start menu at the bottom left hand corner. This is the only way to log off of the server completely (see our previous blog post “How to Properly Log Off the PROCAS Server, and the Benefits of Doing it Properly”). Hitting either of the “X’s” at the top of the screen will not work, as it just disconnects you for the time being. Once you get logged back in, the transaction you were editing may or may not have saved your changes. We have found in most cases that the journal is left how it was, and it may be sitting out of balance.  

Option 2: Record already locked by user

If it reads “File is locked” then this tells us that a different user has the same transaction open. Line two of the message on image 4 will let you know which user is attempting to edit the same entry.

To resolve:

In this case, logging out wont fix the issue. To get unlocked you will need to have the user listed on the screen close down the window you are trying to access. So in this instance,  I would ask “smartin,” the user listed on image 4, to close the window that is locking me up, as we both shouldn’t be editing the same entry at the same time. Once they have finished what they are doing and have closed their window, you shouldn’t have a problem accessing the journal.

Do you have contracts that require you to pay service employees according to the area wage determinations (AWD) as outlined in the Service Contract Act (SCA)?

OR

Do you have personnel that are paid different hourly rates depending on the work they are doing?

If so, you can use the AWD capabilities in PROCAS to automatically record the proper hourly wage rate as well as fringe benefits per hour.

Here’s how:

1. Add AWD fringe accounts to your Chart of Accounts. (Go to >System, >Accounting, >Chart of Accounts)

You will only need to do this if the SCA employees receive a dollar amount per hour worked for fringe. When the labor journal transaction is recorded, it will add a line with an AWD fringe expense account along with its associated direct task. The cost center for the fringe account must match the cost center of the direct task. So, you will need to add a fringe account for each appropriate cost center.  The chart of accounts in PROCAS includes AWD Fringe Expense accounts 6600000, 6600100, and 6600105 by default. These accounts are used by the system to record the earned fringe expense in the labor journal.

When SCA employees also earn fringe per hour on paid leave hours (i.e., holiday, vacation), you will need to add paid leave accounts for each cost center, as shown in the screenshot below. The reason for this will become evident later on in the setup.

2. Add the new fringe accounts to the AWD Fringe Accounts (Go to >System, >Accounting, >AWD Fringe Accounts)

If you added AWD Fringe Expense accounts in step 1, you will need to set up those accounts by department. The system uses the account setup from the AWD Fringe Accounts form to know where to record the fringe expense in the labor journals.

3. Add the AWD information to Billing Setup on the appropriate tasks. (Go to >Projects, >Billing Setup)

• First, locate the task that your SCA employees use to record their time, and then click on Bill Rate by LC/FP Item
• Next, for each SCA labor category, type in the minimum AWD hourly wage to be paid to the employee in the AWD Base $/Hr. When the system creates the labor journal transaction, it will compare the minimum rate for the labor category in the Billing Setup, to the employee’s hourly pay rate in their Personnel record. The system will use whichever rate is higher to record the amount due to the employee.
• If you are also paying employees an amount for fringe per hour worked, type in the appropriate fringe dollar amount in the AWD Fringe $/Hr. box for the labor category (see the screenshot below.) When the system creates the labor journal transaction, it will add a line of detail to record the fringe expense to the accounts you set up in Step 2.

4. Update employee work authorizations. (Go to >Projects, >Work Authorization by Task)

Setting up the direct work authorization for a SCA charge code is no different than setting one up for a non-SCA charge code. However, if the SCA employees also earn a fringe amount on their paid leave hours, there is a specific setup required for the system to include the fringe earned on those hours in the labor journal transaction.

Notice in the screenshot below, Sarah Porter has a standard direct charge code for task 10003.001.00.105 using the 5000105 account and AA labor category. In addition, Sarah has a paid leave charge code for the same task and labor category. This is where the fringe account you set up in Step 1 is needed. Since the task uses cost center 105, the fringe account also needs cost center 105. So, instead of using the 6100000 account that non-SCA employees use, Sarah will be using the 6100105 account.

Here's what Sarah’s timesheet looks like after recording her time to the SCA direct charge code we set up for her. She only needs to record the hours worked.

And the screenshot below shows what Sarah’s labor journal transaction looks like. Lines 1 and 2 are for the 88 hours of direct work that Sarah recorded on her timesheet. Note that while her regular pay rate is $10/hour (as highlighted in the header), the system recorded the $12 hourly rate from the AWD information in the billing setup. The system also added the last 2 lines of detail to record the $3.80/hour fringe expense earned for the 88 hours worked and the associated liability. Since the system will record the fringe automatically, there’s no need for Sarah to record her AWD fringe “hours” on her timesheet.

Although there are several steps, the AWD setup is not difficult. Once that part is done, then the system will do the rest whether you are creating the labor journal transactions automatically, or manually creating them.